YUM! Brands

For a count see our previous blog of mid 2013. It was at $75 at the time and has not moved all that much since. Again we think it is peaking perhaps for no other reason than that we simple cannot fathom why a restaurant chain called “Yum” should trade at 38x earnings. We know that Americans spend more disposable income eating out than they do in the grocery stores but from $10 to $80 in 11 years??

More importantly we noticed that on this stock both the RSI and MACD, together or severally, are extremely efficient and accurate coincident indicators. Each and every time they alert you to a drop of about 10% and this time there is reason to believe that it may go quite a bit further.

This is option stuff. The stock should drop rapidly (say in 3 months) to the base of the last wedge, that is $66. A July 82.5 put is offered at $2.34. That option should be worth 4 to 6 times that at or before expiry. As always talk to your broker. The same June option is offered at $1.40. Normally I prefer slightly longer options but this is one of those cases where shorter might be better, but consult with your broker.